BBRY: Citi, Wells Skeptical of Financing, Competing Bids

By Tiernan Ray

Following this afternoon’s announcement that one of BlackBerry‘s (BBRY) long-time institutional holders, Fairfax Financial Holdings, will lead a consortium to take the company private, at $9 per share, there was some initial skepticism about competing bids, and even about Fairfax’s ability to raise financing for the $4.7 billion price tag.

According to report by CNBC‘s David Faber a short while ago, Fairfax, which has a 10% stake in BlackBerry, does not yet have the financing put together. The letter of intent submitted by Fairfax and partners, Faber said, “includes a ‘go shop’ period, which would allow BlackBerry to solicit and evaluate other bids.”

Citigroup’s Jim Suva, reiterating a Sell rating on the stock, and a $7 price target, this evening writes there is risk to Fairfax completing the necessary financing:

With the company’s cash balance at $2.5 bln (as per their press release on Friday but unclear how much is domestic and tax impact from repatriating cash to shareholders) or $4.77/share, the transaction values the company at $2.2 bln net of cash. We do note that given the company’s cash burn of $500 million in the August 2013 quarter and layoffs which will result in additional severance payments, there is risk to the cash balance. We also note that despite Fairfax’s 10% ownership stake in the company, this deal requires debt financing. Details of additional members in the consortium, their potential equity stake and deals of the debt financing are not available currently. We believe obtaining financing for BBRY given the severity of its business fundamentals deterioration poses a real risk in this transaction. We believe Fairfax is hoping to spur additional bidders which we see as unlikely.

Also this afternoon, Wells Fargo’s Maynard Um, who has a Market Perform rating on the shares, and an $8 to $9 “valuation range,” writes that ” We believe that another bidder may be unlikely given the recent performance of the company and any potential suitors will have to navigate through a multiyear restructuring plan (the breakup fee also raises the hurdle).”

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There are 6 comments

SEPTEMBER 23, 2013 5:17 P.M.

Michael wrote:

It would be nice if you could post whether they or their big clients are net short stock and options. Sounds biased to me - but just another example of Fraud Street.

SEPTEMBER 23, 2013 6:03 P.M.

WatsaHeinsBOD wrote:

We all colluded to screw the shareholders of Blackberry. Watsa didn't even a firn financing in place and he gets $150 million if another bidder comes in. Heins gets a huge payment for destroying the company. BOD probably geta golden watch and some contracting/consulting money from Watsa.
So we all make money and screw rest of the shareholders and other stakeholders.
So what if Watsa said only 4 months ago, Blackberry is worth in the $40s. Now he values it at $9 a share.

Comment: These people have no shame. No morals. No integrity. They will do anything to make a buck, the more they have, the more they want and they will get it through whatever means.

SEPTEMBER 23, 2013 6:45 P.M.

@Watsa... wrote:

and don't forget hwo proud we are of ourselves that we could out press release on friday, halting the stock and getting it to dump 20%, so our stinky low bid *the very next day* actually looks Ok.

pretty sneaky, eh?

SEPTEMBER 23, 2013 7:04 P.M.

Anonymous wrote:

I love the NYTimes fawning over Prem hiring "Buffet's favorite banker, Byron Trott." and others wondering if this means Buffett is interested. I don't know anything about Trott, but I don't see either of them stooping to the press maneuver this past Friday that tanked the stock as a ploy to prep the market for the bid this morning. Too sleazy for either of them.
And, since Buffett knows Bill Gates, you'd think he would've reached to Bill for a little due diligence on this and gone for the NOK deal over this pig.

SEPTEMBER 24, 2013 6:40 P.M.

Anonymous wrote:

This company isn't going anywhere decent. The brand is anything but iconic like ex RIM CEO Mike Lazaridis cried out to the BBC... In fact. In three years Blackberry has as a brand plunged to 180th spot from being in the top 4. Any enterprise, messaging or patent advantages will probably end up in the pennies to the dollar junk bin. Paying $9 per share is dumb and shows a lack of experience re the tech sector...

SEPTEMBER 25, 2013 1:03 A.M.

Big secret? Is this the problem? wrote:

Waterloo is a hole? According to the NYT and the WSJ, Blackberry purchased a new corporate jet two months ago. That's two years after they sold their jet off.

Once Blackberry goes out of business. And Thorsten Heins collects his $55 min severance pay and moves back to Europe... I will be curious to read his autobiography...

About Tech Trader Daily

Tech Trader Daily is a blog on technology investing written by Barron’s veteran Tiernan Ray. The blog provides news, analysis and original reporting on events important to investors in software, hardware, the Internet, telecommunications and related fields. Comments and tips can be sent to: techtraderdaily@barrons.com.